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now, not just in terms of liquidity provision, but also
execution services such as algorithms as they look to
diversify their revenue streams.”
Access to more detailed data has not only put
the buy-side on more of a level footing with newer
market participants. The insights that trading
desks have achieved through deeper analysis has
increased productivity through process automation
and streamlining. Both on they buy- and sell-side,
the economic realities of lower margins and higher
regulatory costs over the decade have fuelled
innovation.
Schroders now has a global equities team
of 17 traders located in four countries, having
previously employed more in London alone,
trading multiple times the volume, covering more
instruments in more countries and far more
investment teams and portfolio managers (PMs).
“This is all down to technology,” says Dalley. “In
the time it took to pick up a paper ticket when I first
“The buy-side has had to grow up. In the
past, there was a tacit understanding that
the sell-side would supply infrastructure
and other execution-related services.
Today, if you want it, you pay for it.”
CARL JAMES, GLOBAL HEAD OF FIXED INCOME
TRADING, PICTET ASSET MANAGEMENT
started, time stamp it and pick up the phone to a
broker, you can now hit a single button that optimises
the execution strategy based on thousands of data
points and back testing, as well as route, execute
and book the trade. Traders have had to evolve and
embrace technology and the progression has been
amazing.”
Dalley’s traders must have a broader set of skills,
operating and understanding beyond their specific
field of responsibility and collaborating with
technologists and data scientists to improve execution
performance.
“The quantitative execution research team can back
up traders’ hunches with solid evidence, independent
of selection bias,” he explains. “By matching algos to
specific stock characteristics, we can automate more
trades in small size, whilst the human traders focus on
62 // TheTRADE // Spring 2020
orders with larger ADV (average
daily volume) or complexity.”
For Neil Joseph, head of equities
trading for EMEA at JP Morgan
Asset Management, the story of the
decade is a shift from automating
execution to automating a wider
range of workflows between
traders, PMs, and the sell-side:
“This has helped our EMEA team
to execute 50% more orders per
trader than three years ago, whilst
reducing trading costs by 20% over
the same period,” he says.
Examples of technology-assisted
workflow innovation include the
automated generation of targeted
notices of liquidity opportunities to
relevant PMs and a mechanism for
flagging block trading signals from
the sell-side.
As at Schroders, Joseph’s team
work closely with dedicated
technologists to develop, test
and implement incremental
improvements, then measure their
impact on execution performance.
“Technology teams are co-located
on the trading desks around the
world. This enables us to develop
using agile methodologies:
we now deploy multiple new
releases per week,” he says.
Growing up
These changes make for
different requirements on - and
relationships with - the sell-side.
Trust in the ability of an individual
sales trader to find liquidity has
given way to a more forensic, data-
driven approach.
“By 2010, broker relationships
based on personal franchises and
networks were already eroding.
In light of MiFID II’s unbundling
and best execution requirements,
these relationships are now highly
strategic, based on compatible
approaches to electronic trading,”
says Carl James, global head of
fixed income trading at Pictet